Author: | Published: 29 Aug 2017

SECTION 1: Market outlook

1.1 What is the outlook for US investment into your
jurisdiction over the next 12 months, given the new US
administration's protectionist focus?

Given the Trump administration's protectionist focus, it is
anticipated that US investments in the Dominican Republic will
decrease during the next 12 months as investors will be more
cautious when investing abroad.

1.2 Are there any industries in particular that you think
are more likely to be affected by the US's new economic
stance?

The export free zones, manufacturing and tourism industries
are more likely to be affected by the US's new economic
stance.

SECTION 2: Approving foreign investments

The Center for Export and Investment (CEI-RD) is the entity
in the Dominican Republic charged with promoting foreign
investment in the country and developing the export sector. The
registration of investments before the CEI-RD is not mandatory
and even without it foreign investors may remit profits and
repatriate capital without prior authorisation, provided they
comply with their local tax obligations. However, registration
in the CEI-RD allows access to preferential treatment and
expedited residence for investors and management positions.

2.2 Are there any investment restrictions in specially
regulated sectors and is the government entitled to any special
rights in these sectors?

Dominican law accords equal treatment to domestic and
foreign investment. The only restrictions on foreign investment
apply to some particularly sensitive sectors from a strategic
point of view, such as mining, in the sense that no other
sovereign state may invest in Dominican mining projects.
Aviation, health projects such as hospitals and pharmacies, the
handling of toxic waste and radio transmissions require a
minimum of Dominican capital. Public media managers must be
Dominican, among other industry-specific restrictions.

2.3 Which authority oversees competition clearance and give
a brief overview of the merger clearance process?

In 2008, Law 42-08 on the Defense of Competition was enacted
in the Dominican Republic; however it was not until the
beginning of 2017 when the law entered into force. Such law
creates the National Commission for the Defense of Competition
(Procompetencia), which is the governmental authority
responsible for administering compliance of such law, as well
as promoting and ensuring the existence of competition to
increase economic efficiency in the services and goods
market.

It is important to highlight that Law 42-08 does not provide
for an antitrust review of transactions prior to the completion
of the same and thus, there is no requirement for the filing of
business combination documents before Procompetencia.
Nonetheless, dominant positions in the market may not be abused
and the antitrust authority is empowered to initiate
investigations relating to behaviours deemed
anticompetitive.

2.4 Are there further approval requirements that foreign
investors should be aware of?

The prior consent of certain governmental authorities or
additional filings may be necessary for investments being made
in regulated industries such as banking, telecommunications and
energy.

SECTION 3: Investment techniques

3.1 What are the most common legal entities used for US
investment in your jurisdiction?

The main business vehicles used in the Dominican Republic
are the following:

corporations (sociedades
anónimas);

limited liability companies
(sociedades de responsabilidad limitada or SRL);
and

simplified corporations (sociedades
anónimas simplificadas).

Of the above, the most common form used by foreign companies
is the SRL. This is mainly because:

There is no mandatory corporate
governance.

The manager is its sole authorised
official (however, there could be more than one
manager).

There is a minimum capital of RD$100,000
($2,500).

Foreign entities can also operate through a branch in the
Dominican Republic by fulfilling certain registration
requirements.

US investors also channel their investments locally through
mergers with or acquisitions of local companies, through
joint-ventures with local parties (corporate or contractual)
and through distribution/agency agreements.

3.2 What are the key requirements for establishment and
operation of these legal entities?

In general terms, the process for incorporating a local
entity involves the following steps:

registration of the trade name at the
National Office of Industrial Property (Onapi);

payment of the capitalisation taxes before the Tax
Administration;

filing of the company's incorporation
documents before the corresponding Chamber of Commerce in
order to obtain a Mercantile Registration Certificate. At
this point, the company is deemed to be duly incorporated;
and

filing of documents before the Tax Administration in
order to obtain a tax identification number.

SECTION 4: Dispute resolution

4.1 How effective are local courts' enforcement and dispute
resolution proceedings, and what should US investors be
particularly aware of?

Litigation processes before Dominican courts can take many,
many years. Additionally, local courts have certain limitations
as to their degree of specialisation with respect to certain
matters.

For the above reasons, in addition to the enactment of the
Commercial Arbitration Law in 2008, arbitration as an
alternative method of dispute resolution has experienced an
unexpected boom in the Dominican Republic. Its advantages are
not only evident in time and price for the parties involved,
but provide a degree of specialisation often standard for
foreign litigants, but that the local judicial courts not
necessarily have.

4.2 Does your jurisdiction have a bilateral investment
protection treaty with the US and is that commonly used by
investors?

The Dominican Republic does not have a bilateral investment
protection treaty with the US.

4.3 Do local courts respect foreign judgments and are
international arbitration awards enforceable?

Foreign judgments and arbitral awards are enforceable in our
jurisdiction. The enforcement of foreign arbitral awards is
subject to the rules of the New York Convention, to which the
Dominican Republic is a party.

With respect to a foreign judgment, at this time the
Dominican Republic is not a party to any convention for the
validation of such. However, both arbitral awards and foreign
judgments may be enforceable once the interested party obtains
an exequatur (local validation judgment) from the
local courts. The exequatur would be granted if the
decision at hand is final and not subject to further remedies,
if all parties were duly summoned, if the due process of law
was observed and if the decision does not contravene public
policy.

SECTION 5: Forex controls and local operations

5.1 What foreign currency or exchange restrictions should
foreign investors be aware of?

There are no foreign currency or exchange restrictions in
the Dominican Republic.

SECTION 6: Tax implications

6.1 Are there tax structures and/or favourable intermediary
tax jurisdictions that are particularly useful for US investors
into the country?

Favourable intermediary tax jurisdictions would include
Spain and Canada since the Dominican Republic maintains a
double tax treaty with these countries. However, the use of
these jurisdictions in a tax structure shall have economic
substance, otherwise, the Dominican Tax Adminsitration could
disregard the structure and apply the corresponding taxes.

Panama is also a popular intermediary jurisdiction. Although
it does not have a tax treaty with the Dominican Republic, it
provides tax relief depending on the structure type.

However, it is worth noting that the Foreign Account Tax
Compliance Act (Fatca) requires that foreign financial
institutions and certain other non-financial foreign entities
report on the foreign assets held by their US account holders
or be subject to payment subject to withholding. Moreover, due
to the recently effective Law against Money Laundering and
Financing of Terrorism, the investor shall disclose to the
government institutions, financial institutions and service
providers such as lawyers, accountants, notary; the ultimate
beneficiary of any given structure.

6.2 Has your jurisdiction benefited from the recent trend
of US companies pursuing inversion structures? If yes, do you
believe this will be threatened under the new
administration?

Yes to both questions.

6.3 What are the applicable rates of corporate tax and
withholding tax on dividends?

As of July 2017, the corporate income tax rate is 27% and
10% on dividend distribution/profit remittance.

In addition, services provided to the government regarding a
significant project (railroad construction for example), could
have some tax incentives, and including income tax on salaries
of the work force, but the relevant service agreement shall be
approved by Congress in order for the project to enjoy tax
benefits.

6.5 Are there any reciprocal tax arrangements between your
jurisdiction and the US? If so, how can they aid
investors?

The effective reciprocal tax arrangements between the
Dominican Republic and the US seek transparency. The Dominican
Republic Tax Authorities subscribed a Tax Information Exchange
Agreement with the US government in 1989 in order to ensure
transparency.

6.6 Do you think that the introduction of new rules and
regulations in the US, such as the Bring Jobs Home Act, is
likely to have an impact on investment into your country?

The Bring Jobs Home Act could impact US investment in the
manufacturing industry (export free trade zones). For example,
in 2016 USA was the second largest investor in this industry
where, due to OECD guidelines and fairly recent Dominican tax
laws, the incentives have been decreasing. Therefore, the Bill
and the more limited incentives could eventually have an
important impact for the specific manufacturing industry in the
Dominican Republic, in which the leading investors are US
citizens.

Mariangela Pellerano joined Pellerano & Herrera
in 2003 and became a partner in 2012. She has 13 years
of experience practicing law, concentrating her
practice at the firm in the areas of project finance,
mergers and acquisitions, trusts, mining, energy and
corporate and banking law.

She advises local and international companies in
connection with project financing and corporate
matters, and has broad experience in mergers and
acquisitions.

She has participated in highly complex business
deals in the Dominican Republic. She assisted Barrick
Gold Corporation, the largest gold producer in the
world, with the complete installation and operation of
the Pueblo Viejo gold mine project. Valued at $2.7
billion, it is the largest foreign investment project
in the history of the Dominican Republic. Likewise, she
served as local counsel of Barrick Gold Corporation in
securing a $1.2 billion syndicated financing for the
operation of its gold mine at Pueblo Viejo.

Pellerano regularly assists local and foreign banks
and multilateral institutions in syndicated and private
equity investments.

Pellerano has been recognised by the International
Financial Law Review (IFLR1000) as a Rising Star. She
has been recognised by Chambers & Partners Latin
America, Legal 500 and Who's Who Legal in Corporate and
Finance.

Bonó has more than 13 years of experience in
tax, corporate, regulatory and labour matters. She has
advised national and multinational companies belonging
to a diverse range of industries: free zone, renewable
energy, electric, industrial, financial, automotive,
tourism, mining, telecommunication, and non-profit
organisations.

For over 12 years, Bonó worked at PwC
Dominican Republic, one of the 'big four' international
audit and business consultancies in the tax and legal
sectors.